Are International Investors creating a bubble? – Property Rant 028

They are the easiest target, the don’t vote, the don’t live next door, and this is precisely why the same drum beats every time house prices increase. As if a group of international investors can control or even massively influence a country. A town maybe, perhaps even a region but for the most part, they aren’t to blame for rising house prices…

So what are?

Video Transcription

Hey, guys. Property Search... Think Gladfish. I'm Brett Alegre-Wood, and this is Property Rant.

So today, our international investors are creating a bubble. All right, now, I get asked this question all the time. And certainly as the market starts to increase, not so much when anything stabilizes, it's amazing how when things stabilize, the international investors are off the hook.

The interesting thing is...I doubt it. Whenever I hear these stories, and I've heard them in Australia. I've heard them in Spain. I've heard them in the U.K. You know, and in fact pretty much all the markets that I've been involved in. You know, where they have vibrant property markets and, you know, they're open markets, I guess you call. The thing is, I really doubt that it's the international investors that are causing a country's problems.

Now, are they causing specific towns... I mean, let's take Coastal Spain in the lead up to the GFC, you know. Actually, yes. Coastal Spain got affected because there are lots of Brits over there, okay, that had holiday homes. And it wasn't so much the ones that had holiday homes that was a problem. It was the ones that bought for investment. They're buying multiples, and really, there was such a sales culture that was, you know, not the due diligence. And, in fact, there wasn't available due diligence.

So there was a lot of those sort of issues in Coastal Spain that did, and you know what happened? Recession hit, and, of course, lots of people pulled out, and it destroyed that market for near on a decade. Interestingly, we're moving back in there now, because we see the bargains coming back, and we see house prices are actually quite good now. But you know, take Mayfair or Night's Bridge or Sydney, you know, those sort of places and not just Sydney, because, actually, Sydney is a massive city. Well, not by world standards, but it is a big city by Australian standards. Specific areas of Sydney that, you know, are affected by international investors. And there is also specific areas where what you'll find is a large...a company will buy a large track of land, and they'll then go market that overseas exclusively.

So you have overseas investors in that area. It's going to become full of investors. Very few owner-occupiers. Those sort of areas, yes, on a micro level like that, but not on a macro level on a country. No, you know, I've not seen it yet, and if anything, all right, there's two things. I think they're an easy target for the media.

So it's very easy to say when things are looking up, you know, when prices are going up blame the international investors. Don't blame the government. Don't blame all the restrictions. Don't blame the lack of supply. Don't blame the planning and how hard it is to get planning. Don't blame all these things. No, let's blame the easy target, because they can't fight back, because they're overseas.

And actually, a lot of international investors drive investment into an area which can actually regenerate an area that was perhaps sitting there, sitting stagnant doing nothing for years. Look, interestingly, London was a bit of an investment ghost town from local investors after the last economic crisis. Yeah? It was the international investors that were investing in. And that's why, you know, living in Singapore every single weekend there was three, four, five different exhibitions, because everybody was coming out here. Now not so much. Because the local investors have come back into the market, but when the local investors exited, the international investors didn't.

And so, actually, they can benefit, you know. So flip this question on the head. Are they creating a bubble? A lot of the time, they're actually stopping for the real drops in prices, okay, and causing a little good even keel. Do they drive up prices generally? They are not big enough. There's not enough of them to drive up a country's house prices. A specific area? Yes, but you often find that those specific areas are actually... I talk about London being a world city, but I'm talking about world towns.

So Mayfair, Night's Bridge, Chelsea, all these sort of places in the U.K., really, are they in the U.K., or are they a World Town? You know, and to some degree, they're World Town, and have been for many, many years. They hadn't been owned by, you know, locals. There's certainly locals involved in there. There's certainly locals living there, all right. So, you know, are they creating a bubble? No, I don't think so. Don't believe that. Most of the time it's media hype.

Okay, guys. Have a great day. Live with passion.

Brett Alegre-Wood
February 18, 2017

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